30. When A Bank Has A Lien On A Deposit

A bank has a lien on the money of a depositor for all indebt-edness due from him. If he borrows money on his note, for example, and does not pay the same at maturity, the bank can charge it up against his deposit. If he deposits checks and draws against them, the bank is clearly entitled to enough of the proceeds to reimburse itself for its advances. But difficult questions sometimes arise when a depositor puts trust money into the bank to his own credit.

1 Price v. Neale, 3 Burr. 1354; Weisser v. Denison, to N. Y. 68

2 Stephens v. Board of Education, 79 N. Y. 183; Hatch v. Fourth National Bank, 147 N. Y. 184; Holly v. Missionary Society, 180 U.S. 284.

First. As between the depositor and the beneficiary or person to whom the deposit belongs, there is no question. The depositor can not by depositing such a fund in his own name divert it from the true owner. The latter can recover his deposit wherever it can be traced.

Second. Suppose such a trust fund is put into a bank in the depositor's own name, and the bank permits him to draw against it, can the beneficiary on discovering what the bank has done, proceed to collect the entire amount or to have it properly entered in his name? The bank would be undoubtedly protected in reimbursing itself in such a case. All payments made or obligations incurred by a bank on the faith of a deposit whose ownership it has no reason to question, may be discharged therefrom; its lien on the deposit is good to this extent.

Third. A different rule, we think, applies to a deposit belonging in fact to another, applied by a bank in payment of a past debt. The indebtedness was not incurred on the strength or confidence of the deposit; and if the bank is obliged to refund to the true owner, it is no worse off than it would have been had the deposit not been made and applied. The deposit in truth belongs to another, why then should the true owner not be entitled to it? A bank might, indeed, make a loan on the security of a stolen bond received in good faith, and hold it even against the true owner until the loan was paid, but it certainly could not keep the bond to secure a past indebtedness.